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Philippines-China Economic Relations

Historical documents prove that the peoples of the Philippines and China have enjoyed extensive economic ties as early as the 7th century. Over the centuries, these socio-economic contacts helped bind the Filipinos and Chinese in a strong spirit of kinship.

In the 21st century, mutual trade and investments provide a solid pillar in the long-standing, friendly relations between the two nations.

In 2005, bilateral trade volume reached US$17.56 billion, representing a growth rate of 31.74 percent over the figure of US$13.3 billion in 2004. Since 2000, bilateral trade volume grew at an annual average of 41.77 per cent, with the Philippines gradually selling more to China than it buys from China.

The trade structure is positive and beneficial to both sides. Top Philippine exports to China include semi-conductor devices, electronic data processing units, copper, petroleum and other resource-based products, automotive parts and fresh fruits. On the other hand, China's top exports to the Philippines include semi-conductors, electronic data processing parts, textile yarns, petroleum products, telecommunication equipment parts, and consumer electronics.

During the visit of Chinese President Hu Jintao to the Philippines in April 2005, a trade volume of US$30 billion was targeted by 2010.

Both the Philippines and China are members of the World Trade Organization. Trade liberalization reforms in both sides heighten the prospects for the expansion and diversification of trade structure. Likewise, the neighbors share special associations in the ASEAN + 1, Asia Pacific Economic Cooperation (APEC) and the ASEAN + 3 --- groupings which commit to deepen regional economic integration in many aspects. In 2002, ASEAN and China signed the Framework Agreement on Comprehensive Economic Cooperation, a document that promises to create a free trade area comprising the nations of ASEAN and China by 2010.

Investment exchange between the two countries exhibits dynamism and promise. Filipino investors, in particular the overseas Chinese, were among those who joined the massive influx of investments from the region in the manufacturing, mostly export-oriented industries in China from the late 1980s through the 1990s. The bulk of Philippine investments are located in the provinces of Fujian and Guangdong, and the city of Shanghai.

Most Philippine investments were initially in the area of manufacturing and joint ventures in areas like brewery, food, manufacturing and light industry. Now these investments include the areas of real estate/property development, services and banking.

The Philippines welcomes the policy of the Chinese government to encourage its competitive companies to invest overseas and participate in exploring economic resources in the Philippines. More on Philippines business policies.

In the past half decade, investment agencies in the Philippines recorded significant investments from Chinese companies in the manufacturing sector including home appliances, vehicles and vehicle parts and accessories, cellular phones and garments, architectural hardware, the areas of construction and property development, telecommunications networks, ICT services such as international call centers and trade/representative offices.

Economic activities benefit from the reciprocal opening of banks of the two countries in each other's territories. The Metrobank of the Philippines opened its branch in Pudong financial district in Shanghai in October 2001 and the Bank of China (BOC) opened its services in Manila in January 2002. Both banks place key focus on trade financing.

The areas of agricultural development, infrastructure development (including tourism infrastructure development), resource development, engineered products, power systems, information and communications technology and ICT-related services are seen as the growth areas in both trade and investments.

Chinese companies may find lucrative opportunities to participate in Philippine projects under various Build-Operate-Transfer (BOT) schemes. These projects include the construction of highways, railroads, roads, seaports and airports, waterworks and sewage treatment facilities, telecommunications and information technology networks, government buildings, housing projects, canals, dams, irrigation, industrial and tourism estates. For more information on the BOT scheme and related incentives, see Investment Policies and Business Opportunities.